Summary: The Balanced Scorecard

Review and Analysis of Kaplan and Norton's Book

BusinessNews Publishing

• Verlag: Must Read Summaries
• Jahr: 2016
• ISBN:
  9782511019986
• Thema: Betriebswirtschaft
• Thema: Verwaltung

The must-read summary of Robert S. Kaplan and David P. Norton's book: `The Balanced Scorecard: Translating Strategy into Action`.

This complete summary of the ideas from Robert S. Kaplan and David P. Norton's book `The Balanced Scorecard` shows that the Balanced Scorecard is a new business management system which links the achievement of long-term strategic goals with day to day operational requirements. It combines traditional financial measures of success (which are lagging indicators because they always measure past performance) with initiatives designed to generate business in the future (represented by leading indicators). In their book, the authors explain how you can build a Balanced Scorecard and how you can use it as a strategic management system. This summary provides all the tools you need to create a Balanced Scorecard and turn your strategy into concrete action.

Added-value of this summary:
• Save time
• Understand key concepts
• Expand your knowledge

To learn more, read `The Balanced Scorecard` and discover the revolutionary tool that will change the way you measure and manage your business.

Summary of The Balanced Scorecard (Robert S. Kaplan & David P. Norton)

1.
THE BALANCED SCORECARD CONCEPT

Main Idea

Traditional financial reporting systems were developed for trading companies and industrial age companies, and measure the events of the past. They do not, however, accurately capture the drivers of future financial performance for modern corporations.

Specifically, a company’s ability to create value in the future will be driven by four key factors:

1. The Financial Perspective
   To succeed financially, how should the company appear to its shareholders?
2. The Customer Perspective
   To achieve the company’s vision, how should it appear to its customers?
3. The Internal Business Process Perspective
   To provide services which meet customer and shareholder expectations, what business processes must the company excel at?
4. The Learning and Growth Perspective
   To achieve the company’s vision, how will the company sustain its ability to change and improve?

These four factors are each represented in the balanced scorecard.

Once a company has developed a balanced corporate scorecard, it can then be used as a strategic management system to manage strategy over the long-term. This involves four steps:

1. The senior management translate the strategy of the business unit into specific strategic objectives
   1. Financial targets
   2. Customer targets
   3. Internal business process targets
   4. Learning and growth targets
2. Next, the specific strategic objectives and systems by which they will be measured are communicated throughout the entire business unit so everyone is aiming for the same targets and objectives.
3. Then, managers must identify what changes will be required if the specified targets are to be met. Plans must be developed on how the organization will implement those changes, resources must be budgeted and allocated and the mechanisms for achieving those targets must be put in place to enable the company to succeed.
4. Finally, the balanced scorecard approach encourages feedback — management can receive specific information about how the organization is progressing towards the achievement of its targets. This feedback, in turn, may cause some realignment of the targets to be made at intermediate stages, until the final format of the company’s strategy is decided upon and implemented.

2.
HOW TO BUILD A BALANCED SCORECARD FOR A BUSINESS ENTERPRISE

1. Financial Perspective

To succeed financially, how should the company appear to its shareholders?

Main Idea

The long-term financial goal of any business enterprise is to provide superior returns on the capital invested.

Supporting Ideas

For most business organizations, the financial goals will be most clearly defined, and usually consist of:

1. Increasing revenues
2. Improving productivity
3. Lowering costs
4. Enhancing asset utilization
5. Reducing risk

Most business owners are also familiar with the differing financial demands that occur whenever a company is in a:

1. Growth stage – requiring high levels of investment
2. Sustain stage – where maintaining market share is important
3. Harvest stage – where the main goal is to maximize cash flow

The appropriate financial strategy during each of these stages will be different, and will be a...